1. Field of the Invention
The present invention generally relates to methods of contract management and, more particularly to managing contingency contracts or agreements in electronic commerce.
2. Background Description
Agreements often include one or more conditions that affect the duties and obligations in a bargain of the contracting parties. These conditions may be based upon events that may or may not occur or, upon required actions by any or all of the contracting parties. Conditions which require the occurrence of an event to satisfy the condition are known as conditions precedent. Conditions which require the event not to occur are referred to as conditions subsequent. Agreements or contracts containing such conditions, which also may be referred to as contingencies, may be referred to as contingency contracts.
For example, in a real estate sales agreement a home buyer may be committed to purchase a house, provided the house passes inspection, i.e., as a condition precedent. If the house does not pass the inspection there may be no obligation on the part of either party. In yet another condition of the same real estate sales agreement, the home buyer may commit to buy the house, unless the buyer cannot arrange financing under predetermined terms, i.e., a condition subsequent. The buyer's subsequent failure to obtain financing would discharge the buyer's obligation to purchase the house. Prior to the occurrence of these contingent events, it cannot be determined with absolute certainty whether the sale will ever occur.
Thus, until it can be determined whether or not a contingent event occurs, the contract is indeterminate with respect to that event. By contrast, once the contingent event occurs, the contract is determinate with respect to that event. Further, typically, occurrence of these contingent events are time limited to make the contract determinate after a period of time.
Typically, depending upon the particular contingency, one contracting party must notify others upon satisfaction of the conditions or the failure thereof. Also, very often these contingencies depend upon the actions of third parties, e.g., a lender, a housing inspector. Miscommunication between the parties can kill or delay the sale and, in some instance result in lawsuits, e.g., where the seller, believing the buyer could not get financing, agrees to sell the property to a second buyer.
Thus, parties to commercial transactions need ways to include contingencies based on events that are recognized, automatically, by a commerce management system managing commercial transactions.